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Three Approaches to Nurturing Healthy Supply Chains
October 17, 2012
Much of the focus in the sustainability movement to date has been directed toward environmental issues — from reducing emissions and diverting waste to preserving and maximizing resources. As much as companies are doing well to reduce their impacts on this front, “people” are just as important as “planet” for true triple-bottom-line success: Forward-thinking companies are broadening their sustainability agendas and taking a holistic look at their operations, paying greater attention to supply-chain management. For larger organizations, this can be a daunting undertaking, but without performing due diligence in this area, a company could be inadvertently supporting and profiting from anything from child or slave labor to conflict minerals, while its suppliers do as well.
Work to improve supply chain is often done in a reactive, rather than proactive, manner, in response to a reputational blow that comes to light — Apple and Nike are two of the higher-profile examples of this in recent years. But as more and more light is shed on this exceedingly complex issue, companies are finding it harder to remain willfully ignorant of the far-flung impacts they may be having around the world; companies are beginning to approach supply-chain management with the intention of extending value throughout, such that it not only eliminates harmful practices but also can improve conditions for all parties involved.
Here are three approaches that can help improve potential issues down to the smallest link in the supply chain:
In January 2012, California put the CA Transparency in Supply Chains Act (SB 657) into effect, requiring manufacturers that do business in California and have annual global sales of over $100 million to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains (a federal version of this law is in the works — legislation was proposed by Congresswoman Carolyn B. Maloney [D-NY] in summer 2011 and approved by the House last fall). In August, the SEC approved new guidelines in the Dodd-Frank Consumer Protection Act that require public companies to disclose their reliance on minerals mined in the Democratic Republic of Congo. While measures such as these mark a step in the right direction, they only require companies to disclose whether they are making an effort to eradicate forced labor or conflict minerals from their supply chains, not to prove that they are.
Even mission-driven companies that proactively approach these issues can be hindered due to a lack of complete information from their suppliers, especially those in developing areas. Third-party audits are an important component of proper oversight, but new services such as LaborVoices can also help companies get a peek behind the curtain. LaborVoices provides crowd-sourced supply chain intelligence through confidential polling of workers in developing areas. During a panel discussion on “Multistakeholder collaboration to drive shift in supply chain” at SB '12 in June, CEO Kohl Gill described the service as “a cross between Yelp and J.D. Power” that connects to workers through their cell phones, which most already have. Reporters provide information on their working conditions (Were you paid this week? Paid on time? Are safety regulations being met?) in exchange for subscriptions to desired services (such as radio broadcasts), and anonymity protects reporters from potential employer retaliation. A pilot program is underway in India, with plans for launch in three more countries before the end of the year.
The scope of proper supply-chain management can be overwhelming, but companies shouldn’t assume that they must tackle it on their own. Multinational food corporations such as Kraft, Nestlé, Unilever and PepsiCo have been working with NGOs — eg., the Roundtable on Sustainable Palm Oil, the World Cocoa Foundation, the Water Footprint Network, the Sustainable Agriculture Initiative Platform — to improve conditions in various components of their supply chains. And an increasing number of smaller U.S. companies are allying themselves with organizations to ensure better conditions for their suppliers’ workers. For example, the Coalition of Imokalee Workers (CIW) has led a Campaign for Fair Food since 2001 to address the widespread occurrence of slave labor conditions in the Florida tomato industry — the top producer of fresh-market tomatoes in the U.S. Fast food companies such as Taco Bell, McDonald's, Burger King and Subway, retailers including Whole Foods and Trader Joe's, and foodservice giants Aramark and Sodexo have signed the CIW’s agreement to only purchase tomatoes from participating growers, which pay their pickers a penny more per pound, ensure that the penny is passed directly to the workers, and enforce a code of conduct.
A growing number of initiatives not only ensure worker rights to better wages and conditions, but also arm them with tools to improve their quality of life.
Fair Trade USA is a non-profit, third-party certifier that gives its stamp of approval to qualifying food and beverage products. Through the use of a rigorous inspection and monitoring system, the Fair Trade name has become respected and recognized as a symbol of environmentally and socially sustainable growing practices. Along with certification, Fair Trade USA gives farmers in developing nations greater control over their business by enabling them to charge fair prices and ensure safe working conditions. By including fair trade producers in their supply chains, food and beverage companies send a message that they prioritize the overall well-being of workers. As more brands use their buying power to support and demand fair trade products, the practices required for certification will become more widespread, increasing global supply.
Also at SB ’12, in a session on “Creating Shared Value in the Supply Chain,” David Griswold, president of Sustainable Harvest Specialty Coffee Importers, described RITS (Relationship Info Tracking System), the company’s in-house traceability database, which allows growers to remain involved in the crop-to-market process beyond harvesting. Farmers receive computer training to use the system, which enables coffee farming co-ops to track crops from individual farmers’ deliveries through the packing and shipping process, receive feedback on quality, and increase security through greater traceability. Sustainable Harvest is piloting RITS in the Kilicafe cooperative in Tanzania and with several cooperatives in Peru.
By looking beyond risk mitigation to the creation of shared value, and using their buying power to improve conditions for everyone affected by their operations, companies will position themselves to outcompete businesses that are profiting from exploited workers around the world.